Vadim Kotelnikov    

Innovation Process

Noble Failure


Business e-Coach     




"I’m sure luck helps every successful entrepreneur. But it doesn’t come without a lot of preparation and hard work… You've got to start with your gut, with something you are really passionate about, for a good reason. You won’t get there by sitting in a closet and thinking, ‘Boy I know the world must want this.’"
~ Charles Schwab


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More About Charles Schwab

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Case Studies Differentiating Between Noble Failure and Stupid Failure

Charles Schwab pioneered seamless stock trading on Internet in 1996 and grew from a small firm to the World's leader.

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David Pottruck, a  legendary leader of Charles Schwab, says: "The idea that failure is okay is ridiculous. I am not going to go around the company and reward someone for failing. But here at Schwab we differentiate between noble failure and stupid failure."1

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Charles Schwab has a set of criteria for defining noble failure.

Noble failure occurs when:

  • you have a good plan and know what you're doing, you've thought everything through carefully, and have implemented with sufficient management discipline, that if you look back in review, you'd conclude it was thoughtfully done

  • you have a reasonable contingency plan to deal with any initial failure and the contingency plan must have been implemented

  • you need to debrief yourself and ask what you can learn from the experience that will lead your company to be smarter next time.

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Charles Schwab journals their failures and lessons they've learned. They maintain also a display of failed innovations and created a videotape for employee orientation. "When celebration of noble failure becomes institutionalized, people within the organization are more willing to reassess earlier decisions1" and take corrective measures.

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1. Venture Catalyst, Donald L. Laurie